A Strategic Profitability Analysis of Southwest Airlines: Applying the Horngren, Datar and Foster Approach

Posted: 21 Jul 2007 Last revised: 10 Dec 2012

See all articles by Charles D. Bailey

Charles D. Bailey

James Madison University

Allison Collins

University of Memphis - School of Accountancy

Denton Collins

Texas Tech University - Rawls College of Business

Kenneth R. Lambert

University of Memphis - School of Accountancy

Date Written: May 1, 2007

Abstract

This case requires students to collect financial and operational data from Southwest Airlines’ 2003–2006 annual reports and to use that data to conduct a strategic profitability analysis of the firm’s changes in operating income. As described in Horngren et al. (2006), this analysis decomposes changes in a firm’s operating income into components related to growth, price recovery, and productivity. Similar to other studies (e.g., Dikolli and Sedatole 2004), this case uses publicly available data to link textbook concepts to ‘‘real world’’ applications. Linking strategy with profitability allows students to see how firms manage inputs in order to compete, grow, and profit in output markets.

Keywords: Strategic profitability analysis, Southwest Airlines, growth, price-recovery, productivity

JEL Classification: J31, M41, O47

Suggested Citation

Bailey, Charles D. and Collins, Allison and Collins, Denton and Lambert, Kenneth R., A Strategic Profitability Analysis of Southwest Airlines: Applying the Horngren, Datar and Foster Approach (May 1, 2007). Vol. 24, No. 4, 2009. Available at SSRN: https://ssrn.com/abstract=1001318 or http://dx.doi.org/10.2139/ssrn.1001318

Charles D. Bailey

James Madison University ( email )

Harrisonburg, VA 22807
United States
901 484-0867 (Phone)

Allison Collins

University of Memphis - School of Accountancy ( email )

Fogelman College of Business and Economics
Memphis, TN 38152-6460
United States

Denton Collins (Contact Author)

Texas Tech University - Rawls College of Business ( email )

School of Accounting
Lubbock, TX 79409
United States

Kenneth R. Lambert

University of Memphis - School of Accountancy ( email )

Fogelman College of Business and Economics
Memphis, TN 38152-6460
United States

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